Good news on income and spending

The news that income and spending in the U.S. economy has been resilient must be cheered as good (see news release here). It may result in our seeing a W-shaped recession as opposed to a U- or L-shaped one. The U.S. consumer is much more resilient than I could possibly have imagined.

Whether this ultimately proves prudent will be determined as the present financial crisis reaches resolution. Irrespective, those tax rebates are a much needed for those who want individuals to keep spending in order to cushion this downturn.

U.S. consumer spending rose more than forecast in May as tax rebates drove the biggest gain in incomes in almost three years, enabling households to at least temporarily overcome soaring fuel bills.

The 0.8 percent rise in purchases was the biggest since November, as Americans bought furniture, clothes and electronics after filling their autos’ gas tanks, the Commerce Department said today in Washington. Incomes grew 1.9 percent, the most since September 2005, and measures of inflation were lower than anticipated.

Bloomberg News, 27 Jun 2008

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